Welcome…
To AcuAccount’s April’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
If you need further assistance just let us know or you can send us a question for our Question and Answer Section.
We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year. Please contact us for advice in your own specific circumstances. We’re here to help!
Making Tax Digital Update
Biggest change from HMRC has come into effect! Meaning VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital (MTD) service to keep records digitally and use software to submit their VAT returns from 1 April 2019.
Updated guidance
HMRC have published an updated version of their Making Tax Digital Mythbusters factsheet. The ‘myths’, and HMRC’s comments covered in the factsheet are summarised as follows:
- Businesses don’t know it’s happening or what to do: HMRC state that over 80% of businesses had stated to make preparations for MTD by December 2018
- Everyone will have to join the service by 1 April: Businesses are required to join MTD and submit their VAT returns using the new service for their first VAT period which begins on or after 1 April. For the majority, who file quarterly, their first MTD returns won’t be due until August or later
- Under MTD, businesses will have to provide more information than they already do: business will need to provide information to HMRC more regularly than they do now
- MTD won’t reduce errors: HMRC maintain that the integrated approach offered by MTD will, in the long term, reduce reporting errors
- HMRC have underestimated the admin burden and costs to businesses for MTD: costs will differ from business to business but there are MTD-compatible solutions available at low cost for most businesses
- Businesses can’t use spreadsheets as part of MTD: Businesses can choose to use spreadsheets to both maintain digital records and perform tax calculations, provided the spreadsheets combine with some form of ‘bridging’ software that will allow their VAT return data to be sent to HMRC from the spreadsheet
- Small businesses should be automatically exempt: Only those with taxable turnover above the VAT threshold of £85,000 are required to join MTD, although the c.1m VAT registered businesses below the threshold can choose to join voluntarily.
- HMRC will penalise me if we get the new process wrong: During the first year of mandation HMRC will take a light touch approach to digital record keeping and filing penalties where businesses are doing their best to comply with the law.
For further information on MTD, see the GOV.uk website.
Employee Mileage Allowances
Confusion often arises over differing tax treatment of mileage allowances paid to employees using their own cars for business, and those provided with a company car.
An employee using their own car for work can claim a mileage allowance from their employer, which is designed to cover the costs of fuel and wear and tear for business trips. The mileage allowance will be tax-free if it does not exceed HMRC’s Approved Mileage Allowance Payment (AMAP) rates, which are currently as follows:
Cars and vans: first 10,000 business miles per year – 45p per mile; over 10,000 miles – 25p per mile
Motor cycles: fist 10,000 business miles per year – 24p per mile; over 10,000 miles – 24p per mile
Bicycles: first 10,000 business miles per year – 20p per mile; over 10,000 miles – 20p per mile
Unless the employer reimburses employees at a higher rate, the payments can be paid tax-free and do not need to be reported to HMRC. However, anything paid above the approved rates is tax deductible, and must be reported to HMRC on form P11D.
If an employer pays less than the approved rates, the employee can claim income tax relief from HMRC for the shortfall. This can be done via a self-assessment tax return or by completing form P87.
For NIC, the 45p per mile rate is used for all business miles in the tax year, not just the first 10,000 miles.
The AMAP scheme does not apply for company cars. However, employees can still claim fuel expenses for all business mileage where they pay for the fuel. The rates are lower than the AMAP rates and are updated quarterly. Current and previous rates can be found on the Gov.uk website at https://www.gov.uk/government/publications/advisory-fuel-rates.
Amounts paid in excess of HMRC’s advisory rates will be taxable.
If the company pays for all fuel (business and private), the fuel benefit will be charged, which is based on the cash equivalent of the benefit each tax year. The fuel benefit is fixed each year (for 2019/20 it is £24,100). This figure is multiplied by the CO2 percentage figure applicable to the company car.
It is also worth noting that if the company pays for all fuel, but the employee reimburses the company for private use, as long as the amount paid back is equal to, or more than, the amount for personal fuel in the same tax year, the employer will not have to pay anything to HMRC or report on such transactions.
NMW and NLW increases take effect
New rates for the National Minimum Wage (NMW) and National Living Wage (NLW) (aged 25 and over) apply from 1 April 2019, and employers must ensure that they implement them accordingly. The rates are as follows:
– 25 and over – £8.21 per hour;
– 21- to 24-year-olds – £7.70 an hour;
– 18- to 20-year-olds – £6.15 an hour;
– under 18s – £4.35 an hour; and
– Apprentice rate – £3.90 an hour.
All other workers including pieceworkers, home workers, agency workers, commission workers, part-time workers and casual workers must receive at least the NMW.
Severe penalties may be imposed for failure to comply with NMW/NLW obligations. Broadly, the penalty percentage which may be imposed for non-compliance is now 200%. The maximum penalty is a hefty £20,000 per worker, although it may be reduced by 50% if the unpaid wages and the penalty are paid within 14 days.
Workplace Pension
The minimum contributions you and your staff pay into your automatic enrolment workplace pension scheme will increase from 6 April 2019. This is also sometimes known as phasing.
It is your responsibility to make sure these increases are implemented.
Who does this apply to?
All employers with staff in a pension scheme for automatic enrolment must take action to make sure at least the minimum amounts are being paid into their pension scheme. This applies to you whether you set up a pension scheme for automatic enrolment or you decided to use an existing scheme.
However, you don’t need to take any further action if you don’t have any staff in a pension scheme for automatic enrolment, or if you are already paying above the increased minimum amounts.
What are the increases?
This table below shows the minimum contributions you must pay and the date when they must increase:
| Date | Employer minimum contribution | Staff contribution | Total minimum contribution |
| New rate: 6 April 2019 onwards | 3% | 5% | 8% |
| Current rate: 6 April 2018 to 5 April 2019 | 2% | 3% | 5% |
If you need further assistance on any of the above topics just let us know or you can send us a question.
We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year. Please contact us for advice in your own specific circumstances. We’re here to help!
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